Top 4 Candlestick Patterns

Top 4 Candlestick Patterns

Japanese candlesticks are a technical analysis tool that traders use to chart and analyze the price movements of crypto. A Japanese candlestick is a type of price chart that shows the opening, closing, high, and low price points for a given period. A variety of patterns will form based on the relationship of the opening and closing, as well as high and low prices for the candlestick. Technical chart readers will review those patterns to determine the larger crypto trends. There are over 60 different candlestick patterns, but don’t worry as you don’t need to know all of them to be successful. In fact, we have distilled the Japanese candlestick patterns down to the top 7 that are easy to spot and offer excellent signals. 1. The Hammer Candlestick Pattern One of the most popular candlestick patterns is the Hammer. The Hammer indicates a downtrend is turning into an uptrend and that traders will want to buy bitcoin. This Hammer pattern is extremely popular because it is simple and easy to spot. It consists of one candlestick with a large wick to the downside and a relatively small colored body at the top. The small body indicates that the open and closing prices are fairly close to one another.This pattern is most effective when it forms towards the end of a downtrend as it suggests prices traded significantly lower, but then reversed to close in the upper half of the candle’s range. That reversal in sentiment can often lead to a larger reversal of the downtrend into an uptrend. 2. Bullish and Bearish Engulfing The Engulfing pattern is another popular formation traders follow. The Engulfing has a bullish version called the Bullish Engulfing while the mirror opposite is the Bearish Engulfing 2. Bullish and Bearish Engulfing The Engulfing pattern is another popular formation traders follow. The Engulfing has a bullish version called the Bullish Engulfing while the mirror opposite is the Bearish Engulfing. The Engulfing pattern consists of two candlesticks.The first candle will follow the direction of the previous trend. In the case of the Bullish Engulfing, the first candle will be red. Then, the second candle will punch a new lowThe Engulfing pattern consists of two candlesticks. The first candle will follow the direction of the previous trend. In the case of the Bullish Engulfing, the first candle will be red. Then, the second candle will punch a new low but close above the opening of the first candle essentially engulfing the first candle.hTe opposite is true for a Bearish Engulfing where the first candle is a small green body and the second candle is a large red body that completely engulfs the body of the first candle. 3. Shooting Star The Shooting Star is a popular pattern widely followed by traders. The simplicity of this single candle pattern helps make it popular. The Shooting Star will have a long wick emerging from the top of a small body. This means that prices opened in the lower portion of the candle’s range, traded to new highs, then immediately retraced closing near the open. The color of the body is insignificant to identifying the pattern. . The Doji The Doji is another single candle pattern that is the easiest to spot on a price chart. The open and close of the Doji are nearly identical coupled with a high and low range that is relatively small. As a result, this price action forms in the shape of a plus “+” sign. The Doji is not necessarily bullish or bearish. The Doji is considered neutral due to the indecision of the market creating similar opening and closing trade. . Inside Bar The Inside Bar is a two-candlestick pattern that signals market consolidation. The first candle is a large-bodied candle that can be either red or green. The second candle sits inside the range of the first candle and is generally the opposite color. This pattern alerts the trader that prices are consolidating the trend from the first candle. As a result, a breakout is looming nearby. Traders typically look for the to occur in the direction of the old trend. So, if the first candle was red, look for a breakdown below the low of the second candle. If the first candle was green, look for a break higher above the high of the second candle. 6. Key Reversal The Key Reversal pattern is just as the name implies, a reversal formation. The Key Reversal involves two candlesticks. The first stick is normal-sized and can be any color. The second candle drives to a new extreme and then reverses into a large-bodied candle.